CMC profits fall on seasonal challenges, weather issues

CMC cited seasonal issues and challenging weather conditions as reasons for the slide in its fiscal second-quarter earnings vs. the same period last year.

The Irving, Texas-based metals recycler and long product producer reported net income of $85.8 million in its fiscal Q2’24 ended Feb. 29. That’s down 52% from $179.8 million a year earlier on Q2’24 sales that slid 8% to $1.85 billion.

“CMC generated historically strong financial results during the second quarter despite seasonal weakness and challenging weather conditions in several key geographies,” Peter Matt, president and CEO, said in a statement on Wednesday.

Matt said the company continues to see good fundamentals within its North American markets.

He noted that encouraging developments include steel product margins over scrap ending Q2 on an upward tilt. Also, new contract awards in the company’s downstream business rebounded sharply, “pointing to strength in the construction pipeline.”

CMC said North America Steel Group shipment volumes of finished steel — which include steel products and downstream products — were 3.6% higher year over year (y/y). The average selling price for steel products slipped $80 per ton vs. Q2’23, while the cost of scrap used jumped $33 per ton. This resulted in a y/y fall in the steel products margin over scrap of $113 per ton.

Micro-mill updates

In January, CMC’s new Arizona 2 plant became the first micro-mill in the world to roll merchant bar quality (MBQ) product, according to Matt.

“Commissioning of MBQ continues to progress well, and we have successfully produced and sold several product varieties,” he said.

Based on CMC’s current outlook for production mix and volume levels, he commented that the plant is expected to achieve breakeven Ebitda results by the end of the fiscal year.

Site improvements at the company’s Steel West Virginia micro-mill in Berkeley County, W.Va., are nearing completion. Initial equipment deliveries are scheduled for the spring and early summer, with a planned start-up in late calendar 2025.

Outlook

Finished steel shipments in CMC’s North America Steel Group are expected to follow a typical seasonal pattern during Q3’24, “while adjusted Ebitda margin should be largely stable on a sequential basis,” Matt said.

“We continue to expect robust spring and summer construction activity driven by increased infrastructure investments, which we anticipate will support an already strong demand backdrop in both the North America Steel Group and the Emerging Businesses Group,” he added.